updated 7/21/2005 7:10:38 AM ET 2005-07-21T11:10:38

Stocks reversed an early loss and turned higher in afternoon trading Wednesday, closing with modest gains, as investors focused on Federal Reserve Chairman Alan Greenspan’s upbeat assessment of the economy and good earnings news from a handful of companies.

Major Market Indices

The benchmark Standard & Poor’s 500-stock index and the Nasdaq composite index both hit new four-year highs.

The market opened lower as investors punished Intel Corp. and Yahoo Inc. after their earnings reports, issued following the close of regular trading Tuesday, fell below analysts’ expectations. Stocks briefly slid further after Greenspan told Congress that the economy should enjoy sustained growth with low inflation in coming months, a sure sign incremental interest rate hikes would continue.

But the sell-off didn’t stick — additional rate increases have long been expected, and the market tends to fall when Greenspan starts talking and gain when he’s done said Todd Leone, managing director of equity trading at SG Cowen Securities.

“It’s the uncertainty” that pushes stocks down, Leone said. “You never know what he’s going to say, but today he said what everyone expected.”

Greenspan’s assessment of the economy was largely upbeat, but he listed three major threats to economic outlook. First, the possibility that wage pressures, which have been dormant, will intensify. Then, the threat posed by surging energy costs and finally, the dangers posed to the housing market if long-term interest rates rise considerably.

“The significant rise in purchases of homes for investment since 2001 seems to have charged some regional markets with speculative fever,” Greenspan said.

The Fed chief also said the increased use of exotic types of mortgages, such as interest-only loans, were of “particular concern.” He said these types of mortgages left homeowners “vulnerable to adverse events” if home prices begin to fall.

Investors also reconsidered the flow of earnings Wednesday, which have been positive aside from a few high-profile disappointments.

The Dow Jones industrial average finished the day up 42.59 points, or 0.4 percent, while the broader Standard & Poor’s 500-stock index was up 5.85 points, or 0.5 percent. The Nasdaq composite index, full of technology stocks, closed the day up 15.39 points, or 0.7 percent, moving into positive territory for the year.

Investors pummeled the day’s losing stocks. Intel fell $1.27 to $27.44 after it reported strong earnings , but a gross margin below analysts’ forecasts. Investors also ignored Yahoo’s stellar earnings , instead focusing on how the results missed analysts’ lofty expectations. The stock fell $4.33 to $33.40.

Eastman Kodak Co. fell 64 cents to $28.10 after it suffered its second straight quarterly loss . The struggling photography company also announced as many as 10,000 additional job cuts on top of 12,000 to 15,000 already planned layoffs.

Investors sold off General Motors Corp. after the automaker missed earnings forecasts by a wide margin . Its stock fell 25 cents to $36.58. The company reported a $286 million loss in the second quarter, dragged down by a $1 billion-plus loss at its North American automotive operations.

Amgen Inc. rose $10.65 to $81.17 after the biotech company’s second-quarter earnings beat expectations and the company increased its already rosy financial outlook for the year.

Pfizer Inc., the world’s largest research-based drug maker, fell 32 cents to $27.06 after its second-quarter earnings gained 21 percent , beating analysts’ expectations. Earnings were helped by strong sales of the company’s blockbuster cholesterol drug, Lipitor.

Drug maker Wyeth Co. beat analysts’ estimates as its second-quarter profit climbed 18 percent, driven by strong sales of the company’s lead anti-depressant and arthritis treatments. Wyeth rose $1.28 to $46.28.

JPMorgan Chase & Co., the nation’s third-largest bank, reported a drop in trading revenue , but its earnings beat reduced analysts’ projections. The stock fell 5 cents to $35.16.

Diversified manufacturing company United Technologies Corp. fell 9 cents to $51.94 after the company said its second-quarter profit rose 19 percent, beating analysts’ expectations. Results were aided by improved performance in most of its businesses and favorable tax and interest income changes from previous audits.

Overseas, Japan’s Nikkei stock average rose 0.2 percent. In Europe, Britain’s FTSE 100 was up 0.3 percent, Germany’s DAX index also added 0.3 percent and France’s CAC-40 lost 0.1 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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